What is a stock?
You are probably wondering what a stock is, and knowing what a stock is, is the most important thing you need to know along with knowing what you are doing when you invest a stock. The stock of a corporation is equivalent to the owner's equity of the company. This means that when you are buying a stock you are essentially purchasing a piece of the owner's equity, meaning you are becoming a part owner of the company. If you are not sure, the term equity can be defined as "the value of the shares issued by a company." Owner's equity will be talked about more in Lesson 3, but briefly is the company's assets minus liabilities. What you have left over is the cash that is attached to the owner's equity. Owner's equity is also the cash that is for the owners of the company. To recap, this means that a stock is basically made up of the cash that accumulates from owner's equity.
Stocks and the owner's equity are always split up into many pieces known as shares. Every share has a base price which you will pay for every share that you purchase from a stock. This base price can be mere pennies, or hundreds of thousands of dollars. Each share that you get will get you a certain percentage or piece of ownership within the owner's equity.
Stocks and the owner's equity are always split up into many pieces known as shares. Every share has a base price which you will pay for every share that you purchase from a stock. This base price can be mere pennies, or hundreds of thousands of dollars. Each share that you get will get you a certain percentage or piece of ownership within the owner's equity.
As you know in today’s world there are many affluent companies that make a boatload of money. I mean think of Apple, Google, Wal-Mart, these all started off with a vision or an idea. Once they started fulfilling initial goals they started to become successful and made cash. This means a start for their business. However, these companies wanted to expand and maximize their growth while they were having success because in the consumer market you can go from high in the sky, to being 2 cent dirt on the ground. Just ask the company Blackberry! So to like I said maximize growth, they decided to enter the stock market. By doing so, they would allow people like you and me to own a portion of the success within the company. Not only would you benefit if the company went up, but a stock means more potential investors for the company, which can mean more cash which is the goal of every company. The most common reason for a company to enter the stock market is when the company is growing rapidly, but needs more capital or money to finance that growth. When a company enters the stock market it is known as an Initial Public Offering, or an IPO. A great example just recently was Twitter Inc. they officially entered the stock market in early November of 2013. A company, or business that is on the stock market and is available for investment is known as a public companies, all others are known as private companies.
In a nutshell, stock is a share in the ownership of a company. Whether you call them equity, shares, or stock it all means the same thing.
Okay, so now hopefully you got a little bit of a sense of why some companies are in the first place on the stock market, as well as a bit of an understanding of what a stock is!
In a nutshell, stock is a share in the ownership of a company. Whether you call them equity, shares, or stock it all means the same thing.
Okay, so now hopefully you got a little bit of a sense of why some companies are in the first place on the stock market, as well as a bit of an understanding of what a stock is!